disclaiming inherited IRA
I have a client who passed away and she had named her estate as beneficiary for her traditional IRA. The account is being set up as a estate IRA under the estate TIN. Her last surviving relative is her father who is now the executor of the estate. He doesn’t need the money and is aware that it needs to be paid out in 5 years. Can he disclaim and name a recipient ( non -profit) for the funds. Thanks
Permalink Submitted by Alan - IRA critic on Tue, 2023-04-11 14:32
He cannot name a recipient. If he disclaims, the funds will pass through the estate according to state intestate rules and result in additional time and expense. Is he trying to simplify the probate process? If so, a disclaimer will probably not do it. Further, leaving the IRA to escheat to the state will result in a 1099R issued to the state EIN, probably long after he closes the estate. It would be easier for him to assign the inherited IRA out of the estate right away to himself as the beneficiary, as that would avoid income to the estate. He could then donate it as a QCD up to the QCD limit if he has reached 70.5.
Permalink Submitted by Jon Heller on Fri, 2023-04-28 19:13
If he assigns the inherited IRA to himself as beneficiary we he fall under the 5 year payout or 10 year payout. Thanks.
Permalink Submitted by Alan - IRA critic on Fri, 2023-04-28 22:01
An inherited IRA assigned out of the estate does not change the RMD. If the 5 year rule applied to the estate, it will also apply to his inherited IRA. If she passed after RBD, the RMD will be based on her remaining LE.